In 1954, the City of Lakewood, California incorporated and needed to provide government services to its residents. In its search for cost-effective alternatives to delivering these services, Lakewood brought forth a concept which now serves as a model for, and a revolution in, the way government agencies provide services to its constituentsï¿½contracting for services.

Governments nationwide now contract for a multitude of services and products from public agencies and private firms. In California, over 25 percent of cities have made service contracting the core of their municipal organizations. In Los Angeles County alone, over 80 cities currently contract with the county government for over 16 categories of services from public safety to roadside tree services.

According to a California State Controllers Report, contract cities generally have the lowest per capita public employee/resident ratios and the lowest personnel costs in comparison to traditional "full service cities." They also generally have the lowest per capita revenue base of cities within the state.

While recently incorporated cities have long turned to the contract model as a key source of service delivery, older cities are now considering this model. As fiscal pressures continue, agencies must find ways to reduce their costs or forgo providing certain services to their constituents. Many are now considering the possibility of contracting with other governmental agencies and the private sector for services in lieu of providing them "in-house."

Intergovernmental contracting allows cities considerable flexibility in the levels of services providedï¿½this can be of benefit in uncertain financial times. When properly implemented, contract services can result in considerable cost savings, increased service levels and the ability to utilize savings for tax reduction, infrastructure investment, or to maintain and expand other services.

Contracting between governmental agencies relies on many of the most basic business concepts; a well-planned service to be delivered, unit costs, client relations and customer service. For many governmental agencies, the entrepreneurial spirit can translate into profits and reduced costs for the contractor and considerable cost savings for the agency receiving the service. The result is a win-win proposition for both parties.